The UAW could still tear Detroit down

It would be a huge stretch to say that the UAW’s decision to sue GM over the company’s failure to make payments into union-controlled pension funds signals the beginning of the end for the automaker. But the lawsuit does serve as a reminder of the one important truth about the GM and Chrysler bankruptcies: the Detroit-based auto companies still have a lot of problems that went unaddressed in the rushed and politicized process to which they were subjected.

A proper bankruptcy would have almost certainly dealt with the companies’ labor costs. Contracts would have been overhauled, work rules simplified, unsustainable pension and health care obligations brought back to realistic levels.

The UAW itself, with its ideological outlook and its neglect of economics, remains a large source of the problem, and the bankruptcies were designed to protect the union at the expense of just about every other stakeholder group. The result was companies that got little relief in terms of labor costs, and which were largely owned by the union itself.

Stay Engaged

Receive our weekly emails!

email address

The actual competitiveness of the Big Three never rated highly as a value for the government’s restructuring of the industry, and the union has shown it is prone to act cavalierly towards those same companies as they struggle back toward profitability. This is the natural consequence of a “bankruptcy” process that shielded the union from the consequences of its own avarice. Whether out of greed or ignorance, the UAW could still bring these companies down.

Permission to reprint this blog post in whole or in part is hereby granted,
provided that the author (or authors) and the Mackinac Center for Public Policy are properly
cited. Permission to reprint any comments below is granted only for those comments written by
Mackinac Center policy staff.